Analysis

Is Ofcom’s 4G decision good for users?

Jennifer Scott

Ofcom has made a ruling that will allow Everything Everywhere to use its existing spectrum allocation to offer 4G services across the UK.

The company – formed from the merger of Orange and T-Mobile – can launch the service any time after 11 September 2012, and considering its trials up in Cumbria have already proved successful, the rumoured launch date of October seems reasonable.

However, rival operators Vodafone and O2 are up in arms about the decision, with comments ranging from “disappointed” through to “frankly shocked”, and have accused Ofcom of treating the issue with “careless disregard”.

But what does it mean for the users of mobile services in the UK?

It is clear that 4G roll-out across the nation needs to happen soon. We are miles behind other countries in Europe and further afield which have fully functioning 4G networks and citizens able to take advantage of the speeds.

The move to 4G is inevitable, but it's critical to get the timing right

Teresa Cottam, research director, Telesperience

4G benefits for consumers and businesses

As culture secretary Jeremy Hunt told Computer Weekly, mobile connectivity is key in ensuring the nation can get online, as many will be dependent on such networks if they cannot get fibre broadband near their homes or businesses.

But, with such an important shift in technology, Teresa Cottam, research director for analyst firm Telesperience, warned both the industry and the regulators to take their time.   

“I see the move to 4G as inevitable, but it’s critical to get the timing right,” she said. “Although it’s often portrayed that we’re behind other countries, what’s important is to ensure maximum benefit for consumers and businesses,” she said.

“Being behind can mean you learn critical lessons, you get a better cost profile for the investment and that you leapfrog others.”

Lack of 4G competition

The decision by Ofcom will only lead to the provision of 4G networks for Everything Everywhere customers, but this is still a significant number of mobile users in the UK – 27 million according to the operator.  

Matthew Howett, practice leader of regulatory telecoms at analyst firm Ovum, claimed the decision was a good one for both those users and other customers, but was far from perfect.

“Having a competitor to launch a 4G service at the same time would have been better, and Ofcom has missed an opportunity to ensure that happened,” he said.

Howett claimed Ofcom could have either enabled other operators to temporarily roam on Everything Everywhere’s network until their own 4G spectrum had been allocated in December’s auction – something Ofcom considered but later decided was too expensive and complex – or the regulator could have forced Everything Everywhere’s hand when it came to the divested spectrum it needs to sell off as part of the merger agreement.

“Rumours have been in the press that 3 will be the likely recipient of this spectrum and it could happen before the auction,” he added. “The problem is Everything Everywhere has no obligation to clear the spectrum until 2015 – as put in by EU regulators,” he said.

“Ofcom could have said it required the spectrum to be cleared before the auction, or before it made the decision, then at least it would have had one other operator to compete with.”

Driving rapid change among mobile operators

Even without the immediate competition, Rob Bamforth, principal analyst at Quocirca, claimed the ruling would push mobile operators to innovate faster when it came to 4G and bring real competition to the market once they are awarded their spectrum allocation.

“The decision is a shot in the arm for other operators to get their act together,” he said. “[Operators] got so used to doing so well with their existing models that they have not had the impetus to change,” he said.

“Before, you had four moderately sized competitors, with a few differences here and there, but no real strong leader and no one coming in with any disruptive tech. There was a status quo, and no one needed to upset the apple cart.

“Now there is going to be big change,” he added. “The Everything Everywhere merger has felt half-baked until now, but if it fully gets behind the rebrand and really pushes 4G, the other operators will have a battle on their hands.”

Legal action could further delay 4G roll-out

However, a dark cloud hangs over these scenarios, which could threaten the whole roll-out of 4G – legal action from any of the operators.

“The real worry is if they slow down due to litigation,” said Bamforth. “It always seems to happen in the mobile industry – mobile operators like to defend their turf like King Canute trying to stop the tide of openness.”

Firstly, Vodafone and O2 could launch legal action against Ofcom – something they have already threatened to do – for giving Everything Everywhere an “unfair competitive advantage” by being able to roll out 4G months before them. This would delay the expected October launch and could lead to a long wait before Everything Everywhere can offer 4G.

Also, Everything Everywhere could launch a legal challenge around the rules of the spectrum auction itself, in an attempt to delay it further, stopping rival operators getting their 4G frequencies and keeping the competitive advantage as the sole 4G player for longer.

Although Howett admitted litigation of both types was possible, he was reasonably confident the operators would recognise the delays it would cause to the industry as a whole and know it would be too detrimental to mobile networks.

“Vodafone and O2 now have a massive incentive to make the spectrum auction go through on time as it is the only way they can get 4G capabilities and compete,” he said. “In theory, they will tell the lawyers to step down and let the process take its course,” he said.

Vodafone and O2 now have an incentive to make the spectrum auction go through on time as it is the only way they can get 4G capabilities and compete

Matthew Howett, practice leader of regulatory telecoms, Ovum

“I don’t know what Everything Everywhere lawyers are likely to do, but I will be very surprised if they took that position. They don’t want to be viewed as the company that always throws lawyers at any issue,” added Howett.

“I don’t think Vodafone and O2 will take litigation out as it delays their chances of getting spectrum, and I don’t think Everything Everywhere could get away with it as it would be too obvious what the operator was trying to achieve.”

Getting on with 4G roll-out

James Walsh, partner at international law firm Eversheds, said Ofcom had no set timeframe to make its mind up about any objections, but added: “Based on Ofcom's statements to date, I would expect the auction to go ahead as currently planned, unless something occurs that fundamentally changes the basis on which Ofcom has said it will conduct the auction.”

If legal action were taken, however, the government would have the ability to issue a directive to Ofcom, insisting it went ahead with the auction as it saw fit and let the operators argue their case with parliament afterwards, ensuring roll-out does not get delayed inevitably.

It seems starting the roll-out as soon as possible and encouraging rivals to innovate is the best course forward, but it is unlikely to be a smooth road.

The decision made by Ofcom and the whole approach to the upcoming spectrum auction will only be effective if operators keep their lawyers caged and think about the industry overall, rather than their own short-term gains.

Now it is time for the waiting game to commence to see if operators can think about the bigger picture.

 


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